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Tuesday, November 25, 2008

Many U.S. retailers, large and small, have good reason to envy Sue Opeka -- sales at her store have been up 15 percent for the past four months and she's up 5 percent for the year so far.

Opeka's store, The Present Moment, sells "affirmational and motivational" gifts such as placards lauding family and friends. The shop sits on the picturesque main street of the wealthy northern Chicago suburb Libertyville.

Opeka opened her store after a corporate career that included a long stint at auto parts maker Tenneco Inc. She attributes part of her success while retailers around the country suffer from a slowing economy to being "non-cyclical."

"When times are good people seek affirmation, when they are bad they seek motivation," she said.

Staring into the face of a possible recession as the holiday shopping season approaches, many small U.S. stores and boutiques catering to wealthier consumers are adjusting strategies and inventories.

Some are adding a personal touch to attract clients who are more cautious with their money and lure them away from the major U.S. retail chains. Those who have succeeded are managing to defy a sharp drop in luxury sales hitting profits at stores like Saks Inc and Nordstrom.

When Opeka launched a customer appreciation program last year, she hoped for 200 responses in the first three months. Instead, nearly 1,000 people answered.

She also holds a series of workshops in the back of her store, which is dubbed "The Gathering Place." The fall schedule has included popular workshops entitled "Laughter Yoga" and "Cultivating Self Love."

"Our goal has always been to go beyond retail and make this a place where women can feel good about themselves," she said over a mug of green tea, as soothing music filled her store.

Libertyville's residents have included actor Marlon Brando. The grave of King Peter II of Yugoslavia, the only European monarch buried on U.S. soil, is located here. Store owners in other fashionable parts of Chicago, home to the newly wealthy as well as old-oney families, have similar stories to Opeka.

"Not everyone wants to buy a $500 tablecloth in this environment, but they are comfortable buying two pairs of $60 earrings," said Danah Fisher, owner of Botanica, a store in the upscale Chicago suburb of Oak Park. "It's not that people are not spending, they're just spending on different things."

Sales are up at Fisher's botanically-themed gift store that stocks goods ranging from a few dollars to $500. She has included more mid-range items and avoided new lines.

"I'm not adding anything new. Why take a risk?" she said.

Fisher has also hosted events for local charities in Oak Park, which is very close to the city and where many wealthy young Chicagoans move to raise families.

GOODBYE, GOOD TIMES

"To get through this season as an independent retailer, you have to adapt," said Doug Fleener, owner of Massachusetts-based retail consulting firm Dynamic Experiences Group LLC.

A contracting U.S. economy and carnage wrought on Wall Street by the financial crisis have hobbled consumer spending -- 70 percent of the world's largest economy -- and bankrupted retailers like electronics seller Circuit City Stores Inc.

The outlook for the holidays is grim.

According to the U.S. Commerce Department, recession fears drove retail sales down a record 2.8 percent in October. Research firm TNS Retail Forward predicts U.S. holiday sales growth this year of 1.5 percent, the weakest since 1991.

On the high-end, a poll from American Express Publishing/Harrison Group in October forecast a 6 percent drop in total gift spending by people earning more than $100,000.

"The current economic environment and the credit crunch have and will continue to have a serious impact on consumer expenditures," said Will Ander, a senior partner at McMillanDoolittle, a Chicago-based retail consultant.

Cynthia Baer has been co-owner of Barrington Home Shoppe for 16 years and sells gifts from $2.50 up to $2,000 in the western Chicago suburb of Barrington, a wealthy town that is home to a mixture of old money and the nouveau riche.

She has decided to go light on inventory for this holiday season so as not to be stuck with goods in January.

"If it's not on the floor, it's not in the store," Baer said. "If we run out, we run out."

She said she has also focused on making her store a place where customers can come for a free cup of coffee, a cookie and a break from all the bad news on television and in the papers.

"A lot of people seem to be standing back and wondering what the financial crisis is going to mean for them," Baer said.

"The terrorist attacks of 9/11 (2001) were an assault on our country and temporarily paralyzed people," she said. "This (financial crisis) has been an assault on people's IRAs and stock portfolios."

Other independent retailers are bracing for tough times ahead. Thomas George is co-owner of E Street Denim, which has three stores selling designer jeans at up to $360 a pair.

Speaking at his first store in the Chicago suburb of Highland Park, a wealthy town with a large Jewish community and home to many of Chicago's professional athletes, George said he has just shelved plans to open a fourth store.

Since opening E Street in 1991 his policy has been to finance everything himself and always avoid debt.

"Times were good a few years ago, but those times are gone," he said. "Consumers will adjust accordingly. Instead of six pairs of jeans they'll maybe get three pairs and instead of four pair of shoes, they may buy two."

To survive, he will maintain a long-standing regimen: work hard seven days a week, from six o'clock in the morning.

"Are we going to face challenges? Absolutely," George said. "Are we going to survive? I hope so."